The Role of Big Four vs. Non-Big Four Auditors in Financial Stability

Abstract

This study investigates the role of Big Four versus non-Big Four auditors in enhancing financial stability through a mixed-methods design, combining panel data analysis with semi-structured interviews. Quantitative results, based on financial stability indicators such as return on assets, leverage ratios, and Altman Z-scores, reveal that Big Four auditors are generally associated with marginal improvements in earnings quality and financial reporting reliability, though their impact on leverage and distress prediction is not consistently significant. Regression analyses confirm that auditor type contributes to financial stability but is moderated by firm size, industry, and governance conditions. Qualitative findings reinforce these results, highlighting that stakeholders perceive Big Four auditors as more resourceful and rigorous, yet concerns remain regarding their independence and timely signaling of financial distress. Interestingly, non-Big Four auditors occasionally outperform in audit timeliness, demonstrating that efficiency and contextual adaptability can mitigate size-based disadvantages. The study concludes that audit firm size alone does not guarantee superior outcomes, and that regulatory oversight, independence, and quality management systems are equally critical in promoting financial stability.